Greenlight Capital’s fund of hedge funds, called Greenlight Masters, has picked tiny Tyro Capital Management for its first seed investment in about five years.
The deal has roughly doubled Tyro’s assets under management, adding $20 million in exchange for a portion of fees. Greenlight Masters has the option to add more than its original investment under the same “founders’ share class”-type terms, Tyro chief executive officer Dan McMurtie told Institutional Investor.
The long-short hedge fund has been in business for six years, started by McMurtie and senior analyst Alex Draime. It has handily beaten the stock market after an initial loss in year one, returning 32 percent in 2019 and about 6 percent for the year to date, according to McMurtie and fund documents.
Even with the strong recent track record and McMurtie’s muscular social-media following — his Twitter account @SuperMugatu has an audience of nearly 50,000 — raising capital has been tough for Tyro, as for all but a few upstart hedge funds.
“It’s insanely hard,” McMurtie said.
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Greenlight Masters had a years-long relationship with Tyro before investing, and only then after intensive due diligence, according to Greenlight portfolio manager Mitch Golden. The fund of funds generally has its pick of emerging managers to underwrite and scanty competition.
“We’ve seen a small number of recognized hedge fund launches getting almost all the attention and investment, and then orders of magnitude more firms that struggle to raise capital,” Golden told II in an interview. “We just want to find the best athletes and that’s what we’ve done here. We’re aiming high: We are only looking for folks that we believe can generate exceptional returns over time, and Dan and Alex can and have done that.”
The seed deal is potentially worth much more to Tyro than the initial $20 million check size. It’s also a signal to other investors that a brand-name investment firm has done its homework and liked what it found.
But whether or not Greenlight’s stamp of approval draws capital in from the sidelines, its fund of funds sees a money maker in its latest play.
“If nothing happens and they just compound capital as they have up until now, we’ll do just fine,” Golden said. “And if they raise additional capital, then we’ll do even better.”
McMurtie and co. may be running a portfolio twice as large as before, but one thing hasn’t changed since taking on a brand-name backer. “I do get to keep my Twitter account,” the founder said.